Wednesday, 20 October 2010

It's regressive, George

It matters that the government sets itself a distributional fairness test - even if some on the right who think this unnecessarily accepts a social democratic view of the world. It would be wrong to argue that this test matters only to the government's leftist critics (which it does). For it is also the central public policy challenge which the Coalition has set for itself.

Where the government has, so far, consistently overclaimed is in making claims that it has introduced policies to meet it.

The emergency budget was pronounced progressive by George Osborne - and regressive by the Institute of Fiscal Studies after 24 hours. The IFS won the argument, for almost all neutral observers.

Deja vu. Today, the Comprehensive Spending Review was pronounced progressive by George Osborne - including in the impact of public service cuts. But it's regressive, George, as will no doubt become very clear over the next day or two.

Over at Left Foot Forward, Fabian research director Tim Horton and I set out why the Treasury's own figures show that the comprehensive spending review is regressive, not progressive. Contrary to Osborne's claims, the impact of public spending changes do hit the less well-off harder than the better-off.

Indeed, it is also pretty clear that the regressive effect would be greater still if the Treasury did not exclude such a large proportion of public spending (about half) from its distributional modelling. Howard Reed and Tim Horton will offer a fuller analysis later this week, building on their earlier public spending research and modelling ahead of the CSR. (The Treasury admit there are important methodological issues in doing this, which is a longer debate, and invite input as to how to develop this from their initial attempt today).

Still, it is an important and welcome step forward that George Osborne has published from the Treasury a distributional annex to the CSR documents to try to address the distributional fairness issues in public spending. This helps to establish the importance of making the distribution of public spending an important part of public analysis, so that this is not only a question applied to changes in tax and benefits.

The attempts at a fairness narrative does mean that the government has had an increased incentive to take some good policy decisions - such as the pupil premium and investing in the child tax credits today, so as to have a neutral impact on child poverty. (It will need to do more to reduce child poverty, which is a clear commitment of this government too).

Ultimately, these fairness instincts do have some impact, but they remain rather more marginal in policymaking than they need to be for the Coalition's rhetoric to be matched by policy reality.

So, at least one cheer for having endorsed and championed the distributional fairness test is established as a core element of political debate.

All we need now is a politics and policy agenda which might start to meet it.